Buy Alembic Pharma, Q4 Net Up By 115%

Alembic Pharma has come up with a good set of numbers for the March 2013 quarter. The company reported an 11% growth in its total income to Rs 378.08 crore. Its net profit increased by 115% to Rs 43.65 crore on a YoY basis during the quarter. Owing to the solid profitability, the company has declared a dividend of Rs 2.50 per share.

The Pharma company has business operations in India as it also exports its products. Its domestic business adds 62% to its topline while the remaining 38% is added by exports. During the quarter, sales from the domestic operations increased by 16% to Rs 236 crore on a YoY basis. Exports grew by just 3% to Rs 142 crore. In the export category, however, its international generics segment has outperformed every other segment. Its international generic formulations business adds more than 20% in the topline and has seen a phenomenal growth of 54% during the quarter.

On the cost side, Alembic pharma has seen a sharp decline in its input costs. The raw material and packaging costs declined by 15%, while the stock in trade declined by 174%. Traded goods also declined by 45% and other expenses rose by 11%. All these soft input costs have increased its EBITDA margins by more than 500 basis points to 17.41%.

Its interest cost also declined by 66% to Rs 1.83 crore. Its debt to equity ratio has also improved significantly to 0.33x during this quarter against 0.90x in March 12.

During the quarter, the company has filed 2 ANDAs taking its total ANDAs to 57. As per the press release, its 24 ANDAs are approved by the US FDA.

The company has also said that it has launched a Dermatology division during the year and will add 8 products further in the year. Alembic Pharma has also commissioned its new formulation facility and the full plant will be operational by the end of the first half of FY14. The new capacity will add to the business and hence is a strong growth driver for the company.

The stock at the CMP of Rs 117 is trading at a P/E multiple of 13.4x which should be considered as a fair valuation if one considers a growth trajectory that the company is entering now. We advise readers to enter the counter that will emerge as a value creator in the future.